Zacks Industry Outlook Highlights Arista Networks, monday.com and Paylocity

For Immediate ReleaseChicago, IL – June 2, 2025 – Today, Zacks Equity Research discusses Arista Networks ANET, monday.com MNDY and Paylocity Holdings PCTY.Industry: Internet SoftwareLink: https://www.zacks.com/commentary/2479638/3-internet-software-stocks-to-buy-from-a-prospering-industryThe Zacks Internet Software industry has been benefiting from accelerated demand for digital transformation and the ongoing shift to the cloud. The high demand for Software as a Service or SaaS-based solutions due to the increasing need for remote working, learning and diagnosis software has been a major driver for industry players.The growing demand for solutions that support hybrid operating environments is a key catalyst. The increasing deployment of AI and generative AI is driving prospects. The growing proliferation of Augmented and Virtual Reality devices is noteworthy. Increasingly sophisticated cyberattacks have been driving cybersecurity application demand. Arista Networks, monday.com and Paylocity Holdings are benefiting from these trends. However, heightened geopolitical risks, persistent inflation and high interest rates are major headwinds.Industry DescriptionThe Zacks Internet Software industry comprises companies offering application performance monitoring, infrastructure and application software, DevOps deployment and Security software. Industry participants offer online payment solutions, asset optimization software, multi-cloud application security and delivery, social networking, 3D printing applications, and cloud content management solutions.They use the SaaS-based cloud computing model to deliver solutions to end-users, as well as enterprises. Hence, subscription is the primary revenue source. Advertising is also a major revenue source. Industry participants target a variety of end markets, including banking and financial services, construction, consumer packaged goods, education, energy, legal, various service providers, federal governments, and animal health technology and services.3 Trends Shaping the Future of the Internet Software IndustryAdoption of SaaS Grows: The industry has been benefiting from the continued demand for digital transformation. Growth prospects are alluring due to the rapid adoption of SaaS, which offers a flexible and cost-effective delivery method for applications. It also cuts down on deployment time compared with legacy systems. SaaS attempts to deliver applications to any user, anywhere, anytime and on any device.It has been effective in addressing customer expectations of seamless communications across multiple channels, including voice, chat, email, web, social media and mobile. This increases customer satisfaction and raises the retention rate, driving the top lines of the industry participants.Moreover, the SaaS delivery model has supported industry players in delivering software applications amid the coronavirus-led lockdowns and shelter-in-place guidance. Remote work, learning and health diagnosis have also boosted the demand for SaaS-based software applications.Pay-As-You-Go Model Gains Traction: The increasing customer-centric approach is allowing end-users to perform all required actions with minimal intervention from software providers. The pay-as-you-go model helps Internet Software providers scale their offerings according to different user needs. The subscription-based business model ensures recurring revenues for industry participants. The affordability of the SaaS delivery model, particularly for small and medium-sized businesses, is another major driver. The cloud-based applications are easy to use. Hence, the need for specialized training is reduced significantly, which lowers expenses, driving profits.Ongoing Transition to Cloud Creates Opportunities: The growing need to secure cloud platforms amid the increasing incidences of cyberattacks and hacking drives the demand for web-based cybersecurity software. As enterprises continue to move their on-premise workload to cloud environments, application and infrastructure monitoring is gaining importance. This is increasing the demand for web-based performance management monitoring tools.Zacks Industry Rank Indicates Bright ProspectsThe Zacks Internet Software industry, placed within the broader Zacks Computer And Technology sector, carries a Zacks Industry Rank #53, which places it in the top 22% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. The industry’s earnings estimates for 2025 have moved up 3.4% since June 30, 2024.Given the positive outlook of the industry, there are several stocks worth picking for healthy portfolio returns. However, before we present the top industry picks, it is worth looking at the industry’s shareholder returns and current valuation first.Industry Beats S&P 500 and SectorThe Zacks Internet Software industry has outperformed the broader Zacks Computer and Technology sector and the S&P 500 Index in the past year.The industry has returned 34.1% over this period compared with the S&P 500’s jump of 12.1% and the broader sector’s appreciation of 12.7%.Industry's Current ValuationOn the basis of forward 12-month price-to-sales (P/S), which is a commonly used multiple for valuing Internet Software stocks, we see that the industry is currently trading at 5.33X compared with the S&P 500’s 5.07X and the sector’s forward 12-month P/S of 6.22X.Over the last five years, the industry has traded as high as 5.83X and as low as 4.4X, with a median of 4.89X.3 Stocks to Buy Right Nowmonday.com - This Zacks Rank #1 (Strong Buy) company is benefiting from portfolio strength (multi-product offering) and continued focus on operational excellence. You can see the complete list of today’s Zacks #1 Rank stocks here.Expanding product portfolio with the launch of new monday work management capabilities and AI-powered features (AI-powered risk insights, AI-powered portfolio reports, managed templates, and resource planning capabilities) is a key catalyst. At the end of the first quarter of 2025, MNDY users performed more than 26 million AI actions, up more than 150% since the end of 2024.monday.com shares have appreciated 24.5% year to date. The Zacks Consensus Estimate for 2025 earnings has surged 12% to $3.72 per share over the past 30 days.Paylocity Holdings- This Zacks Rank #1 company is benefiting from a comprehensive suite of cloud-based Human Capital Management and payroll software solutions tailored for mid-sized businesses. Paylocity’s recurring revenue model, which provides financial stability and predictability, is driven by high client satisfaction and low churn rates. This bodes well for top-line growth.Paylocity shares have declined 5.2% year to date. The Zacks Consensus Estimate for PCTY’s fiscal 2025 earnings is pegged at $7.01 per share, up 5.4% over the past 30 days.Arista Networks– A Zacks Rank #2 (Buy) company, Arista Networks is benefiting from a strong portfolio, which is highly scalable, programmable and provides data-driven automation, analytics and support services.Arista continues to benefit from the expanding cloud networking market, which is driven by the strong demand for scalable infrastructure. The growing demand for 200- and 400-gig high-performance switching products augurs well for Arista Networks’ long-term growth.The company’s shares have dropped 21.9% in the year-to-date period. The Zacks Consensus Estimate for its 2025 earnings is pegged at $2.56 per share, up 3.6% in the past 30 days.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Arista Networks, Inc. (ANET): Free Stock Analysis Report Paylocity Holding Corporation (PCTY): Free Stock Analysis Report monday.com Ltd. (MNDY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks